Maryland Insurance Agents and Convenience Fees

Limits on Insurance Payment Convenience Fees in Maryland

Convenience fees are the surcharge a business adds to a payment if the person making the payment is using a credit or debit card to make the payment.

Maryland makes a specific exception for convenience fees for insurance agents.

Here is the link...

http://insurance.maryland.gov/Insurer/Documents/bulletins/17-10-Credit-Cards-Accepted-for-Insurance-Payment-Premiums.pdf

The document says this:

Bulletin 17-10

Date Sept 22, 2017

Guidance in Determining the Charge for Actual Expenses by a Licensed Insurance Producer or Qualified Surplus Lines Broker

A licensed insurance producer or a qualified surplus lines broker may set the charge for making payments by credit card at a rate equal to:

1 - the actual expense to be charged at the time of the transaction; or

2 – an amount that is less than or equal to the actual expenses incurred.

Visa Rules on Convenience Fees

Visa's rules on convenience fees require the business (merchant) to make the same flat dollar amount charge on every convenience fee regardless of the amount of the payment.

Example under Visa's Rules:

1 - Customer pays business $100. The business charges a $5.00 convenience fee.

2 - Customer pays business $1,000. The business must charge the same $5.00 convenience fee.

NOTE: Visa does not allow a percentage to be charged for convenience fees.

Here is the Conflict Between Maryland and Visa

Credit card transaction cost are made up of several fees. The largest and most discussed of these fees is the "Discount Rate"

"Discount Rates" are always a percentage.

The actual "Discount Rate" charged fro each payment varies based on the brand of card - Visa, MasterCard, AMEX, DiscoverCard - and the issuing bank or the card, and whether the card is a business or personal card, etc.

The business accepting the card payment has no way of knowing the actual cost of the card transaction in real time.

Maryland only allows the actual expense or less to be charge.

Problems:

1 - You have no way of knowing this amount
2 - Visa requires you to charge the same flat amount for every payment

These two requirements simply cannot both work.

Solution

Using Simply Easier Payments moves the fee away from the agency. You are not charging the fee. That frees us to only have to comply with the Visa Rules - which we do.

California Premium Trust Accounts and Insurance Payments

California Requires Use of In State Bank for Cash Payments?

On July 18, 2017 Jerry Brown signed into law AB 1460.

It allows insurance agents to use out of state banks for Premium Trust accounts.

But, it had an interesting twist if the agent received the premium payment in cash.

Here is the quote from this overview article...

"The bill would also require any licensee who receives fiduciary funds as cash to initially maintain those funds in a trust account in a bank or savings and loan association in California, licensed by the State of California or the United States government and insured by the FDIC."

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB1460

What do you think? 

Is this how you are operating your agency?

South Carolina Limits on Insurance Agency Convenience Fees

South Carolina Insurance Agents Fees

Can South Carolina insurance agents charge a convenience fee when their customers pay premiums using a credit card?

Yes - BUT - the maximum amount they can charge is $3.00 unless they get specific written approval for for a higher fee from the Insurance Commissioner.

Also, they must get the insured to sign a written agreement for these fees and show the fee as separate from the insurance premiums.

https://www.doi.sc.gov/DocumentCenter/View/7241/2013-11-Service-and-Policy-Fees

Compliance

We -  Simply Easier Payments - take your compliance very seriously. That means we do our best to keep current on laws and regulations in every state to do our best to never create a compliance issue for you using our service.

Can North Carolina Insurance Agents Charge a Fee fro Credit Card Payments

North Carolina Insurance Premium Payments and Credit Cards

Can an insurance agent charge a fee for accepting premium payments by credit card in North Carolina.

I believe the answer is it depends on the Merchant Contract the agent has with the Processor. If the Merchant contract shows a cost of zero for all transactions, then the agent is complying with the portion of the North Carolina Insurance Code shown here...

https://www.ncleg.net/…/BySecti…/Chapter_58/GS_58-3-145.html

§ 58-3-145. Solicitation, negotiation or payment of premiums on insurance policies.
An insurer, agent, or broker may accept payment of an insurance premium by credit card or debit card if the insurer accepting payment by credit card or debit card meets the following conditions:
(1) The insurer complies with the prohibition against unfair discrimination contained in G.S. 58-63-15(7).
(2) The insurer pays the fees charged by the credit card company or debit card issuer for the payment of premiums by credit card or debit card. (1967, c. 1245; 1979, c. 528; 1991, c. 720, s. 7; 1999-365, s. 1; 2011-215, s. 1.)

Compliance

Simply Easier Payments complies with this by having all the Merchant contracts used by its agency partners agree to zero fees and charges for the agency accepting payments by credit or debit cards.

This includes no fees for charge backs.

We take your compliance very seriously. That means we do our best to keep current on laws and regulations in every state to do our best to never create a compliance issue for you using our service.

Insurance Premium Collection in Pennsylvania

Insurance Premium Collection Certificate

Like many states, Pennsylvania has addressed collecting insurance premiums very specifically. Take a quick look at my two previous posts to see some of the details.

If you use a third party to accept ACH, Credit Cards, Debits Cards or e-checks, this specific section of the law needs to be considered.

https://www.pacode.com/secure/data/031/chapter37/s37.17.html

§ 37.17. Collection of premiums requires certificate or license.

 A person who is responsible for the collection and forwarding of premiums for insurance policies shall be deemed to be performing as an agent and shall be required to obtain a certificate and appointment from the insurance entity on whose behalf collection is being performed, or hold a license as a broker. This section does not apply to employes of agents or agencies who exclusively provide clerical support as described in the definition of agent in §  37.1 (relating to definitions). 

Money in Transit or Money at Rest

Is the third party you are using holding the funds at anytime?

If they are this is called "money at rest".

It is our opinion that once a third party holds your funds at rest they fall under this requirement in Pennsylvania to have a certificate or license.

How Do You Know

If you have your own Merchant Account with a bank or other third party for processing electronic payments, then it is our opinion the money processed is in transit, not at rest.

If you have an agreement with an payment aggregator or payment facilitator, then that third party is the actual party collecting and holding the premiums before funding your bank account. In this case it is our opinion that third party needs to be certified or license under this Pennsylvania Law.

You will have an agreement with an aggregator or payment facilitator, but that will not be a true Merchant Agreement. You need to be sure in writing.

Compliance

At Simply Easier Payments we take compliance with all State insurance laws and regulations very seriously. We spend time each year updating our understanding of these issues to be certain we never put our users at risk.


Let me now you thoughts and questions.

Premium Trust Account for Insurance Agents in Pennsylvania

Pennsylvania Insurance Premium Trust Accounts

Insurance agents in Pennsylvania are required by the Pennsylvania Insurance Code to manage premium payments in specific ways.

Here is a link to the section of the Pennsylvania Code...

https://www.pacode.com/secure/data/031/chapter37/s37.81.html

Here is what the Code says...

§ 37.81. Premium accounts.

 (a)  Insurance agents and brokers who have the express written consent of their entities to mingle premium moneys with their own funds may do so if the following exist:

   (1)  Moneys held in a fiduciary capacity are reasonably ascertainable from the books of account and records of the agents or brokers.

   (2)  Amounts due entities are equal to or less than the combined accounts receivable and current bank balances.

 (b)  An agent or broker who does not have the express consent of his entities to mingle premium moneys with his personal funds shall hold the premium moneys separate from other funds in accordance with the following:

   (1)  An agent or broker who does not make immediate remittance to his entities may not deposit premiums in office operating accounts but shall keep the moneys in a separate bank account from which disbursement may not be made other than for the payment of premiums to the entities, the return of premiums to the insured or the transfer of commissions or the withdrawal of voluntary deposits.

   (2)  Voluntary deposits in the premium account in excess of premiums collected and unpaid to entities may be made for the purpose of maintaining a minimum balance, to guarantee the adequacy of the account or for the purpose of the payment of premiums to the entities in advance of their collection. These deposits may not be withdrawn except to the extent that the remaining balance is equal to the total of net premiums collected and unpaid to entities.

   (3)  The deposit of a premium collection in a separate bank account may not be construed as a mingling by the agent or the broker of the net premium and of the commission portion of the premium. The commission portion of the premiums may be withdrawn from the separate bank account at the discretion of the agent or broker.

   (4)  The maintenance in a separate bank account of at least the net balance of premiums collected and unpaid to the entities by agents operating under the ‘‘account current system’’ shall be construed as compliance with this section and section 633.1 of the act (40 P. S. §  273.1), if the funds so held are readily ascertainable from the books of account and records of agents.

   (5)  Agents and brokers who make immediate remittance of collections to their entities need not maintain separate bank accounts for these collections. To constitute immediate remittance, payment to entities shall be in the same form as the collection was received from the insured.

   (6)  When both an operating and a premium account are maintained by agents and brokers under this section for purposes of segregating premiums collected, the premium account balance shall include funds sufficient to pay premiums collected and any amount delinquent or in dispute with the entity represented. Upon reconciliation of delinquent or disputed accounts, excess moneys remaining in the premium bank account may be withdrawn as if they had been voluntary deposits.

   (7)  An agent may deposit premiums collected from insureds in an interest bearing account when the agent is not required to make an immediate remittance to the entity of premium moneys, if the following are met:

     (i)   The moneys are not placed in an account upon which a penalty may be levied against the principal for early withdrawal.

     (ii)   The moneys are placed in an account insured by the United States Government or instruments secured by the United States government. 

Compliance

At Simply Easier Payments we take compliance with all State insurance laws and regulations very seriously. We spend time each year updating our understanding of these issues to be certain we never put our users at risk.


Let me now you thoughts and questions.

Do You Need an Agent's Licence to Accept Premium Payments in Pennsylvania

Taking Payments and Licensing

It may be strange to think about this question, but Pennsylvania is not alone in addressing this in their State Insurance Laws.

Pennsylvania addresses accepting premiums in several ways. Here is a link to one of the bulletins they have issued on this issue.

https://www.pabulletin.com/secure/data/vol43/43-45/2127.html

The important sections differentiate between in office premium payments and away from office premium payments.

Licensed producer activities:

4. Collecting premiums in person at other than a recorded place of business.

Nonlicensed clerical and CSR activities:

11. Receiving premiums at the recorded place of business where the payment is being made on a binder, endorsement or existing policy.

Compliance

At Simply Easier Payments we take compliance with all State insurance laws and regulations very seriously. We spend time each year updating our understanding of these issues to be certain we never put our users at risk.

Let me now you thoughts and questions.